501(c)(3) Operational Test

501(c)(3) Operational Test

To be or stay exempt under section 501(c)(3) of the Internal Revenue Code, an organization must be operated exclusively for one or more of the exempt purposes described in section 501(c)(3) (“exempt purposes”).

The first part of a compliance analysis with respect to this requirement referred to as the Operational Test is to examine whether the organization is actually operating consistent with the exempt purposes stated in its articles of organization.

The second part of the compliance analysis is to examine whether it is operating exclusively (interpreted in the regulations to mean operating primarily) in furtherance of its exempt purposes.

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Source: veteran-owned